This calculator provides estimates for educational purposes only. It is not affiliated with any bank, lender, or financial institution. Results are not a loan offer or guarantee of terms. Consult a licensed mortgage professional for advice specific to your situation.
HELOC vs Personal Loan
The trade-off between a HELOC at 7.02% and a personal loan at 12% to 18% APR is not just a rate comparison. Personal loans are unsecured, so a default does not put your home at risk. HELOCs are secured by your home and offer much lower rates plus possible tax deductibility, at the cost of foreclosure risk on default.
The rate spread and what it costs
HELOC rates in May 2026 cluster around 7.02% for prime-tier borrowers, with the lifetime cap typically 18%. Personal loan rates from major online lenders (SoFi, LightStream, Marcus, Discover, Upstart) run 7% to 11% for the best-credit borrowers, 10% to 16% for solid mid-tier, 14% to 22% for fair credit, and 20% to 35% for subprime. The rate spread between HELOC and personal loan for a comparable borrower profile is typically 4 to 10 percentage points, which translates to meaningful dollar amounts at any borrowing size above about $10,000.
On a $30,000 borrowing need over 5 years, a HELOC at 7.02% amortizes to $595 per month with $5,701 in total interest. A personal loan at 14% APR on the same $30,000 over 5 years amortizes to $698 per month with $11,891 in total interest. The personal loan costs $6,190 more over 5 years, or about $1,238 per year of additional interest. For a borrower with the ability to qualify for HELOC pricing, the rate spread is substantial.
The rate spread reflects the lender's risk position. The HELOC is secured by a recorded second lien on the borrower's home; if the borrower defaults, the lender can foreclose to recover the balance. The personal loan is unsecured; the lender has only the borrower's personal credit and recourse to legal action if the loan defaults. Personal loan lenders price the additional risk into the rate. The CFPB consumer-credit trends data shows the spread has been remarkably stable across rate cycles, suggesting the secured-vs- unsecured risk premium is a structural feature of the market rather than a temporary anomaly.
Speed, fees, and qualification
Personal loans have meaningful advantages on speed and fees. SoFi, LightStream, and Marcus advertise next-day funding for qualified borrowers, with the full application process completable online in 20 to 40 minutes. HELOCs take 5 to 14 days at digital lenders like Figure and 21 to 50 days at large banks. Personal loans typically charge no origination fee at the prime lenders (some lower-tier lenders charge 1% to 9% origination); HELOCs typically have $0 to $2,000 in closing costs. For small balances where the closing-cost overhead is a meaningful fraction of the loan, the personal loan can beat the HELOC on all-in cost despite the higher rate.
Qualification is structurally different. Personal loans qualify based on credit, income, and DTI; no collateral is required and the lender does not pull title or order an appraisal. HELOCs qualify based on the same factors plus home value, equity, and the lien position. A borrower with strong credit but limited home equity may qualify for a personal loan but not a HELOC. A borrower with strong home equity but weaker credit may qualify for a HELOC but face higher personal-loan rates. The qualification structures are partially substitutable but each product has its own access constraints.
The qualification timeline matters for time-sensitive borrowing. A personal loan can fund in 1 to 5 business days for a strong-credit borrower. A HELOC can take 30 to 50 days at a traditional bank, with the full appraisal and title work typically accounting for most of the delay. For an urgent medical bill, a narrow opportunity window, or a need to close on a real-estate transaction quickly, the personal loan's speed advantage is often decisive even if the rate is higher. The HELOC's advantage is best realized when the borrower can plan ahead and absorb the longer timeline.
Cost comparison by borrowing size and term
| Borrowing amount | HELOC at 7.02% (5-yr amortize) | Personal loan at 14% (5-yr) | Cost difference |
|---|---|---|---|
| $10,000 | $198/mo, $1,900 int | $233/mo, $3,964 int | +$2,064 personal |
| $20,000 | $397/mo, $3,801 int | $465/mo, $7,927 int | +$4,126 personal |
| $30,000 | $595/mo, $5,701 int | $698/mo, $11,891 int | +$6,190 personal |
| $50,000 | $991/mo, $9,502 int | $1,163/mo, $19,818 int | +$10,316 personal |
| $75,000 | $1,487/mo, $14,253 int | $1,745/mo, $29,727 int | +$15,474 personal |
Cost-difference column shows additional cost of the personal loan over the HELOC across 5 years. Comparison excludes HELOC closing costs (typically $0 to $2,000), which would shift small-balance comparisons toward the personal loan at the margin.
The unsecured premium: when it is worth paying
The 4 to 10 percentage-point rate premium on a personal loan versus a HELOC is the cost of preserving home equity as untouched collateral. For some borrowers, this premium is worth paying. The clearest case is a borrower with high job-loss risk or unstable income. The HELOC's foreclosure risk on default is asymmetric: small monthly savings during good times, catastrophic loss during bad times. The personal loan caps the downside at credit-damage and collection risk, which is recoverable in a way that home loss is not.
A second case where the personal loan's premium is justified is when the borrower wants to preserve home equity as a separate emergency reserve. Drawing a HELOC for a current use consumes the equity headroom that might otherwise be available for a future emergency. The personal loan leaves the home equity untouched and available. This logic is most compelling for borrowers in stable jobs and living situations who view their home equity as long-term financial security rather than present-day spending capacity.
A third case is when the personal-loan rate is unusually competitive due to a promotional offer or a relationship-pricing benefit. Some online lenders offer 12-month 0% APR introductory periods, which beat any HELOC on cost during the intro window. Some employer-sponsored programs (through Marcus, for example) offer member-only rates 1% to 2% below market. These tactical wins can flip the rate comparison in specific cases, though they require diligent shopping to find.
Frequently asked questions
What are typical personal loan rates in 2026?
Personal loan rates vary by credit profile. Borrowers with FICO 760+ typically see 7% to 11% APR. Borrowers with 700 to 759 FICO see 10% to 16%. Borrowers with 660 to 699 see 14% to 22%. Borrowers below 660 see 20% to 35%. The rates are higher than HELOC rates because personal loans are unsecured (no collateral).
When is a personal loan cheaper than a HELOC?
Rarely on rate alone. The HELOC at 7.02% beats personal loans at all but the very best borrower-profile pricing. The personal loan can be cheaper on total cost when: (1) the borrowing amount is small enough that HELOC closing costs offset the rate savings, (2) the HELOC underwriting timeline is too long for the use case, or (3) the borrower has insufficient home equity to qualify for HELOC pricing.
How much does the secured vs unsecured difference matter?
Substantially in worst-case scenarios. A HELOC default can lead to foreclosure on the home; a personal-loan default leads to credit damage, collection actions, and possible civil lawsuit but does not directly threaten the home. For borrowers with high job-security or stable income, the foreclosure risk on a HELOC is theoretical. For borrowers with variable income or significant near-term financial uncertainty, the difference between secured and unsecured debt is meaningful.
Which has faster funding: HELOC or personal loan?
Personal loan, in most cases. Online personal lenders (SoFi, LightStream, Marcus, Discover) advertise next-day or same-week funding for qualified borrowers. HELOCs take 5 to 14 days at digital lenders like Figure and 21 to 50 days at large banks. For time-sensitive borrowing needs the personal loan often wins on speed regardless of rate comparison.
Can I get a tax deduction on personal loan interest?
No, in nearly all cases. Personal loan interest is not deductible for personal-use borrowing (consumer purchases, debt consolidation, medical bills, etc.). The exception is when the personal loan is used for business or investment purposes, where it may be deductible on Schedule C or against investment income. HELOC interest can be deductible when used for home improvement and the borrower itemizes.
What about smaller borrowing amounts, like $5,000 to $15,000?
Personal loan typically wins at this size. HELOC closing costs of $0 to $2,000 plus minimum-credit-line requirements (most lenders set $10,000 to $25,000 minimums) make HELOC inefficient for small balances. Personal loans typically start at $1,000 to $5,000 with no closing costs and faster funding. For smaller borrowing needs the personal loan is structurally the better fit.